Exhibit 10.25
CARDINAL HEALTH, INC.
DIRECTORS DEFERRED COMPENSATION PLAN
AMENDED AND RESTATED EFFECTIVE MAY 1, 2004
CARDINAL HEALTH, INC.
DIRECTORS DEFERRED COMPENSATION PLAN
(THE "PLAN")
I
PURPOSE
Cardinal Health, Inc. and its affiliates (collectively, the "Company") is
willing to provide nonemployee members of its Board of Directors (the "Board")
with the opportunity to defer the payment of their Board fees for retirement
savings purposes. The Company's goal is to retain and reward its Board members
by helping them to accumulate benefits for a comfortable retirement. The Plan
was originally effective as of January 1, 2000.
II
ELIGIBILITY
All members of the Board are eligible to participate in the Plan. If you
elect to participate in the Plan, you will sign a Directors Deferred
Compensation Agreement which details the requirements you must satisfy to be
eligible to receive this supplemental retirement benefit from the Company.
III
DEFERRED COMPENSATION ACCUMULATIONS
A. UNFUNDED NATURE OF PLAN
The Plan is considered to be an "unfunded" arrangement as amounts
generally will not be set aside or held by the Company in a trust, escrow, or
similar account or fiduciary relationship on your behalf. Each participant's
rights to benefits under the Plan are equivalent to the rights of any unsecured
general creditor of the Company. However, the Company may open accounts with one
or more investment companies selected by the Chairman, in his discretion, and
may invest funds subject to this Plan in those investment companies. The Company
also may establish a deferred compensation trust (rabbi or otherwise) in
connection with the Plan. Each participant may be permitted to direct how the
portion of the Company's funds allocable to him or her is invested from among
the available alternatives, if such investment accounts are established. The
Company currently expects any such alternatives to be similar to those available
under its tax-qualified retirement plan for employees, but is not obligated to
make these or any other particular investment options available. If a
participant is permitted to direct how the portion of the Company's funds
allocable to him or her is invested among the available alternatives, the
participant may be permitted to change such direction from time to time;
provided, however, that in no event shall a participant who is a current Board
member or who has been a Board member during the last six (6) months be
permitted to change any investment in a Cardinal Stock Account (as defined
below) to any other investment alternative or change any investment in any other
investment alternative to a Cardinal Stock Account, except, in either case, as
to future director's fees to be earned as provided below under the heading
"Election to Defer into Common Shares". After a participant's board membership
has been terminated for at least six (6) months, a participant may elect to
change his or her investment in a Cardinal Stock Account to any other investment
alternative or change
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his or her investment in any other investment alternative to a Cardinal Stock
Account without regard to the restrictions set forth in the preceding sentence.
All investments shall at all times continue to be a part of the Company's
general assets.
B. ACCUMULATIONS
To measure the amount of the Company's obligations to a participant in
this Plan, the Company will maintain a bookkeeping record or account of each
participant's "Accumulations".
You may elect (within 30 days of when you first become eligible to
participate in the Plan for your initial calendar year of participation or, for
subsequent calendar years, not later than the December 31 prior to each such
year) to defer payment of a portion or all of your director's fees to be earned
during the balance of the current or next calendar year, as applicable, as a
credit to your Accumulations. Once made, any such election (including without
limitation the percentage of director's fees to be deferred) shall be
irrevocable for all director's fees earned during the calendar year for which
the election is made. If you desire, your election can continue in effect from
year to year until you change it, but any change will be effective only as of
the January 1 of the calendar year following the calendar year in which you
change your election. The minimum amount you may defer is 20% and the maximum is
100% of all fees expected to be paid to you as a director of the Company.
C. ELECTION TO DEFER INTO COMMON SHARES
Subject to the provisions of this Article III, whenever you make a
deferral election pursuant to the preceding paragraph, you may also elect to
have all or a portion of the deferred fees to be deemed invested in common
shares, without par value ("Common Shares"), of the Company (such deferred fees,
the "Share Election Fees"). On the date when your Share Election Fees would
otherwise be payable to you (if you had not elected to defer such payment) (the
"Payment Date"), the Company will credit to a separate account (your "Cardinal
Stock Account") a number of hypothetical Common Shares (and fractions thereof)
having a Value equal to the Share Election Fees. For purposes of this Plan, the
"Value" of a Common Share on a particular day shall mean the closing price of a
Common Share on the New York Stock Exchange on that day (or, if there is no
trading of the Common Shares on that day, on the most recent previous date on
which trading occurred). Any election made pursuant to this paragraph shall be
irrevocable for all director's fees earned during the calendar year for which
the election is made. Any election made pursuant to this paragraph shall remain
in effect for fees payable in subsequent calendar years unless you deliver a
written notice to the Secretary of the Company setting forth a different
deferral election, which shall be applied to future calendar years until further
written notice is received by the Secretary of the Company pursuant to this
section. Notwithstanding the foregoing, if any deferral election into Common
Shares would make a transaction between the Company and any other entity
ineligible for pooling-of-interests accounting under APB No. 16 that but for the
nature of such deferral would otherwise be eligible for such accounting
treatment, such deferral election shall be treated as a deferral election into
the other available funds pro-rata.
If any recapitalization, reorganization, reclassification, consolidation,
merger of Cardinal Health, Inc. ("Cardinal") or the Company or any sale of all
or substantially all of Cardinal's or the Company's assets to another person or
entity or other transaction which is effected in such a way that holders of
Common Shares are entitled to receive (either directly or upon subsequent
liquidation) stock, securities, or assets with respect to or in exchange for
Common Shares (each an "Organic Change") shall occur, then your Cardinal Stock
Account (if any) shall be adjusted so as to contain such shares of stock,
securities or assets (including cash) as would have been issued or payable with
respect to or in exchange for the number of Common Shares credited thereto
immediately before such Organic Change, if such
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Common Shares had been outstanding. If the assets held in your Cardinal Stock
Account immediately after such adjustment are not equity securities, then you
shall be permitted to re-direct the investment thereof into the other investment
choices then available under this Plan.
D. EARNINGS (OR LOSSES)
At least once each calendar year while you have a credit balance in your
Accumulations, the Company will credit your Accumulations with earnings (or
losses), if any, for the period since the last such crediting and determine the
value of your Accumulations at that time. The earnings (or losses) shall be
credited on the basis of the earnings (or losses) allocable to your directed
investments. The Company also reserves the right to adjust the earnings (or
losses) credited to your Accumulations and to determine the value of your
Accumulations as of any date by adjusting such earnings (or losses) or such fair
market value for the Company's tax and other costs of providing this Plan.
In the case of your Cardinal Stock Account (if any), the earnings (or
losses) credited to such account shall consist solely of dividend equivalent
credits pursuant to this paragraph. Whenever a dividend or other distribution is
made with respect to the Common Shares, then the cash value of such dividend or
other distribution shall be credited, on the payment date for such dividend or
other distribution (the "Dividend Payment Date"), to an alternative investment
option under the Plan, as determined by the Committee in its sole discretion.
Such cash value shall be based upon the number of Common Shares deemed to be
held in your Cardinal Stock Account as of the record date for such dividend or
other distribution (the "Dividend Record Date"), if such Common Shares were
outstanding. If such dividend or other distribution is in the form of cash, the
cash value so credited shall be equal to the amount of cash that would have been
distributed with respect to the Common Shares deemed to be held in your Cardinal
Stock Account as of the Dividend Record Date, if such Common Shares were
outstanding. If such dividend or other distribution is in the form of Common
Shares, the cash value so credited shall be equal to the value, as of the
Dividend Payment Date, of the number of such Common Shares (and fractions
thereof) that would have been distributed with respect to the Common Shares
deemed to be held in your Cardinal Stock Account as of the Dividend Record Date,
if such Common Shares were outstanding. If such dividend or other distribution
is in the form of property other than cash or Common Shares, the cash value so
credited shall be equal to the value, as of the Dividend Payment Date, of the
property that would have been distributed with respect to the Common Shares
deemed to be held in your Cardinal Stock Account as of the Dividend Record Date,
if such Common Shares were outstanding. The value of such property shall be its
fair market value as of the Dividend Payment Date, determined by the Board based
upon market trading if available and otherwise based upon such factors as the
Board deems appropriate.
Under the federal income tax rules in effect as of the adoption of this
Plan, the amounts credited to your Accumulations, including earnings, will not
be taxable income to you in the year they are credited to your account. You, or
your beneficiaries in the event of your death, will generally be taxed on these
amounts and the credited earnings only if and when benefits are actually paid to
you or your beneficiaries.
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IV
BENEFITS
A. VESTING
All contributions to the Plan will always be 100% "vested". This means you
will always be entitled to receive benefits from your Accumulations.
B. PAYMENT OF BENEFITS
1. RETIREMENT BENEFITS. You will be eligible to receive retirement
benefits under the Plan upon your retirement from the Board after
attaining age 65. Retirement benefits will generally be paid as an
annual benefit payable for 10 years. The amount of your benefit will
equal the amount necessary to amortize your total Accumulations over
the 10-year period. The amount payable each year will either be
based on an approximately equal amortization of principal plus
actual earnings (or less actual losses) or an amortization based on
an assumed interest rate declared by the Company from time to time
during the period of distribution. You must give the Company at
least 30 days advance written notice of your intention to retire and
receive retirement benefits. Actual benefit payments will begin on
the first day of the second month following your satisfaction of all
requirements for payment.
2. DISABILITY BENEFITS. If you become totally disabled before
satisfying the requirements for retirement benefits, you will be
eligible to receive payment of the amounts credited to your
Accumulations as an annual benefit payable for 10 years. The amount
of the benefit will be determined in the same manner as retirement
benefits. For this purpose, "total disability" means a physical or
mental condition which totally and presumably permanently prevents
you from engaging in your usual occupation or any occupation for
which you are qualified by reason of training, education, or
experience. It is up to the Company to determine whether you qualify
as being totally disabled and the Company may require you to submit
to periodic medical examinations to confirm that you are, and
continue to be, totally disabled. If your disability ends, your
disability benefit payments will stop. However, you could continue
to qualify for benefits under another provision of the Plan.
3. DEATH BENEFITS. In the event of your death while receiving benefit
payments under the Plan, the Company will pay the beneficiary or
beneficiaries designated by you any remaining payments due under the
terms of your Deferred Compensation Agreement, using the same method
of distribution in effect to you at the date of your death. In the
event of death prior to beginning to receive benefits under the
Deferred Compensation Agreement, the Company will pay benefits to
your beneficiary or beneficiaries, beginning as soon as practicable
after your death. In this case, benefits will generally be paid as
an annual benefit payable for 10 years computed in the same manner
as retirement benefits. The Company will provide you with the form
for designating your beneficiary or beneficiaries. If you fail to
make a beneficiary designation, or if your designated beneficiary
predeceases you or cannot be located, any death benefits will be
paid to your estate.
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4. OTHER TERMINATION OF BOARD MEMBERSHIP. If your membership on the
Board terminates for any reason other than retirement, death, or
total disability, then your Accumulations will be paid to you as an
annual benefit payable for 10 years computed in the same manner as
retirement benefits, beginning as soon as administratively
practicable after your term of office ends.
5. PAYMENT ALTERNATIVES. At the Company's election, or upon your
request, benefits may be paid in a lump sum or over a shorter or
longer period of time than the 10 years generally called for, as
described above. However, no request by you or your beneficiaries
for a different payment method will be binding on the Company, and
any accelerated or deferred payment of benefits shall be made only
in the sole discretion of the Company. In addition, the Company may
alter the payment method in effect from time to time in its
discretion. If the payment method is altered, the amount you or your
beneficiaries will receive will be computed under one of the
alternative methods for determining payment amounts provided for
under the normal form of distribution for your Accumulations,
determined by the Company in its discretion.
6. CHANGE IN CONTROL. If a Change in Control occurs, and your
membership on the Board terminates within the 2-year period
immediately following a Change in Control, then you shall be
entitled to receive your Accumulations in a single lump sum within
30 days of your termination of office, notwithstanding any other
provision of this Plan or your Directors Deferred Compensation
Agreement. Also, following a Change in Control, the Company's
discretion to alter the payment methodology (described in Subsection
5, above) is limited to accelerating your benefits; the Company
cannot, after a Change in Control, defer the commencement of
payments or extend the period of distribution beyond the normal
periods described in the preceding Subsections.
For purposes of the Plan, a "Change of Control" means: (i) the
acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934 (the "Exchange Act") (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of twenty-five percent (25%) or more of either (A) the then
outstanding Shares of the Company (the "Outstanding Shares") or (B)
the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Voting Securities"); provided, however,
that for purposes of this subsection (i), the following acquisitions
shall not constitute a Change of Control: (I) any acquisition
directly from the Company or any corporation controlled by the
Company, (II) any acquisition by the Company or any corporation
controlled by the Company, (III) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (IV) any
acquisition by any corporation that is a Non-Control Acquisition (as
defined in Subsection (iii) of this Section); or (ii) individuals
who, as of the Effective Date of this Plan, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least
a majority of the Board; provided, however, that any individual
becoming a director subsequent to the Effective Date whose election,
or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or
threatened
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solicitation of proxies or consents by or on behalf of a Person
other than the Board; or (iii) consummation of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition by
the Company of assets or shares of another corporation (a "Business
Combination"), unless, such Business Combination is a Non-Control
Acquisition. A "Non-Control Acquisition" shall mean a Business
Combination where: (A) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Shares and Outstanding Voting Securities immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than fifty percent (50%) of, respectively, the then
outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns
the Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership immediately
prior to such Business Combination of the Outstanding Shares and
Outstanding Voting Securities, as the case may be, (B) no Person
(excluding any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, twenty-five
percent (25%) or more of, respectively, the then outstanding shares
of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination (including any
ownership that existed in the Company or the company being acquired,
if any) and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or (iv) approval by the
shareholders of the Company of a complete liquidation or dissolution
of the Company.
V
MISCELLANEOUS PROVISIONS
A. NO RIGHT TO COMPANY ASSETS
As explained previously, this Plan is an unfunded arrangement and the
agreement you will enter into with the Company does not create a trust of any
kind or a fiduciary relationship between the Company and you, your designated
beneficiaries or any other person. To the extent you, your designated
beneficiaries, or any other person acquires a right to receive payments from the
Company under this Plan or your Directors Deferred Compensation Agreement, that
right is no greater than the right of any unsecured general creditor of the
Company.
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B. GENERAL RESTRICTIONS
Notwithstanding any other provision of this Plan or any Directors Deferred
Compensation Agreement, the Company shall not be required to issue or deliver
any certificate or certificates for Common Shares under this Plan prior to
fulfillment of all of the following conditions:
(i) Listing or approval for listing upon official notice of issuance of
such shares on the New York Stock Exchange, Inc., or such other
securities exchange as may at the time be a market for the Common
Shares;
(ii) Any registration or other qualification of such shares under any
state or federal law or regulation, or the maintaining in effect of
any such registration or other qualification which the Chairman
shall, in his absolute discretion upon the advice of counsel, deem
necessary or advisable; and
(iii) Obtaining any other consent, approval, or permit from any state or
federal governmental agency which the Chairman shall, in his
absolute discretion after receiving the advise of counsel, determine
to be necessary or advisable.
Nothing contained in this Plan shall prevent the Company from adopting
other or additional compensation arrangements for the participants.
C. COMMON SHARES AVAILABLE
The maximum aggregate number of Common Shares which may be credited to
Cardinal Stock Accounts pursuant to this Plan is 60,000. Common Shares issuable
under the Plan may be taken from authorized but unissued shares, treasury
shares, shares held in a trust for purposes of the Plan, or purchased on the
open market. No single participant may acquire under the Plan more than 30,000
Common Shares.
In the event of any stock dividend, stock split, share combination,
corporate separation or division (including, but not limited to, split-up,
spin-off, split-off or distribution to Cardinal's shareholders other than a
normal cash dividend), or partial or complete liquidation, or any other
corporate transaction or event having any effect similar to any of the
foregoing, then the aggregate number of Common Shares reserved for issuance
under the Plan shall be appropriately substituted for new shares or adjusted, as
determined by the Compensation and Personnel Subcommittee in its sole
discretion.
D. MODIFICATION OR REVOCATION
Your Directors Deferred Compensation Agreement will continue in effect
until revoked, terminated, or all benefits are paid. However, the Directors
Deferred Compensation Agreement and this Plan may be amended or revoked at any
time, in whole or in part, by the Company in its sole discretion. Unless you
agree otherwise, you will still be entitled to the benefit, if any, that you
have earned through the date of any amendment or revocation. Such benefits will
be payable at the times and in the amounts provided for in the Directors
Deferred Compensation Agreement, or the Company may elect to accelerate
distribution and immediately pay all amounts due.
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E. RIGHTS PRESERVED
Nothing in the Directors Deferred Compensation Agreement or this Plan
gives any director the right to continue to hold such office. The relationship
between you and the Company shall continue to be determined by the applicable
provisions of the governing documents of the Company and by applicable law.
F. CONTROLLING DOCUMENTS
This is merely a summary of the key provisions of the Directors Deferred
Compensation Agreement currently in use by the Company. In the event of any
conflict between the provisions of this Plan and the Directors Deferred
Compensation Agreement, the Directors Deferred Compensation Agreement shall in
all cases control.
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